Question 1

Under the Bretton Woods system,central bankers could obtain foreign currency loans from the

Accepted Answer

A) U.S.Treasury Department. 
B) World Trade Organization. 
C) International Monetary Fund. 
D) Bank of England. 
A) U.S.Treasury Department. 
B) World Trade Organization. 
C) International Monetary Fund. 
D) Bank of England.

Question 2

The exchange rate system agreed to in 1944,in which the U.S.government agreed to buy or sell gold at a fixed price of $35 per ounce,is referred to as

Accepted Answer

A) the gold standard. 
B) the Bretton Woods System. 
C) a floating currency standard. 
D) a flexible exchange rate system. 
A) the gold standard. 
B) the Bretton Woods System. 
C) a floating currency standard. 
D) a flexible exchange rate system.

Question 3

All of the following are considered among the four most important determinants in explaining exchange rate fluctuations in the long run except

Accepted Answer

A) tariffs and quotas. 
B) preferences for domestic and foreign goods. 
C) interest rates. 
D) relative rates of productivity growth across countries. 
A) tariffs and quotas. 
B) preferences for domestic and foreign goods. 
C) interest rates. 
D) relative rates of productivity growth across countries.

Question 4

Fluctuating exchange rates can alter a multinational firm's profits and losses.The U.S.corporation,Motorola,produces cell phones and sells cell phones in Mexico.If the dollar appreciates against the peso,then Motorola's revenues from these operations should ________ and its costs from these operations should ________.

Accepted Answer

A) rise; fall 
B) rise; rise 
C) fall; fall 
D) fall; rise 
A) rise; fall 
B) rise; rise 
C) fall; fall 
D) fall; rise

Question 5

A persistent shortage of yen at a given fixed exchange rate (in dollars per yen)is evidence that the yen is ________ versus the dollar.This shortage can be reduced or eliminated through a ________ of the yen.

Accepted Answer

A) undervalued; devaluation 
B) undervalued; revaluation 
C) overvalued; revaluation 
D) overvalued; devaluation 
A) undervalued; devaluation 
B) undervalued; revaluation 
C) overvalued; revaluation 
D) overvalued; devaluation

Question 6

The ________ system of currency exchange was set up in 1944.

Accepted Answer

A) gold standard 
B) Bretton Woods 
C) managed float 
D) flexible 
A) gold standard 
B) Bretton Woods 
C) managed float 
D) flexible

Question 7

Suppose the U.S.dollar is backed by one-sixth of an ounce of gold and the British pound is backed by one-third of an ounce of gold.The exchange rate between the U.S.dollar and the British pound equals ________ per pound.

Accepted Answer

A) $0.50 
B) $1.00 
C) $1.50 
D) $2.00 
A) $0.50 
B) $1.00 
C) $1.50 
D) $2.00

Question 8

A decrease in a fixed exchange rate from $1.75 per pound to $1.60 per pound is called a(n)________ of the pound.

Accepted Answer

A) devaluation 
B) depreciation 
C) appreciation 
D) revaluation 
A) devaluation 
B) depreciation 
C) appreciation 
D) revaluation

Question 9

During the Chinese experience with pegging the yuan to the dollar,the yuan was undervalued.As a result,

Accepted Answer

A) there was a surplus of yuan on the market that the Chinese government had to purchase to maintain the peg,depleting China's reserves of dollars. 
B) there was a surplus of dollars on the market that the Chinese government had to purchase to maintain the peg. 
C) the prices of Chinese exports were higher than they would have been without the peg. 
D) the equilibrium value of the yuan was below the pegged value of the yuan. 
A) there was a surplus of yuan on the market that the Chinese government had to purchase to maintain the peg,depleting China's reserves of dollars. 
B) there was a surplus of dollars on the market that the Chinese government had to purchase to maintain the peg. 
C) the prices of Chinese exports were higher than they would have been without the peg. 
D) the equilibrium value of the yuan was below the pegged value of the yuan.

Question 10

Under pressure from Japan,the United States and Europe,China announced it switched from pegging the yuan against the dollar to linking the value of the yuan to a 'basket' of currencies.The result of this change was

Accepted Answer

A) the value of the yuan increased slightly relative to the dollar. 
B) the value of the yuan has become very responsive to changes in demand and supply in the foreign currency market. 
C) the value of the yuan has increased dramatically and is beginning to remove the trade imbalance between the United States and China. 
D) the value of the yuan has decreased dramatically and has further spurred Chinese exports. 
A) the value of the yuan increased slightly relative to the dollar. 
B) the value of the yuan has become very responsive to changes in demand and supply in the foreign currency market. 
C) the value of the yuan has increased dramatically and is beginning to remove the trade imbalance between the United States and China. 
D) the value of the yuan has decreased dramatically and has further spurred Chinese exports.

Question 11

In order to support an undervalued euro,the European Central Bank must ________ dollars.Over time,this action will cause the rate of inflation in the EU to ________.

Accepted Answer

A) buy; decrease 
B) buy; increase 
C) sell; increase 
D) sell; decrease 
A) buy; decrease 
B) buy; increase 
C) sell; increase 
D) sell; decrease

Question 12

If two countries adhere to a gold standard,the exchange rate for their currencies is fixed.

Accepted Answer

A) True 
 B)False

Question 13

A Big Mac costs $4.56 in the United States and 9.2 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,what is the dollar cost of a Big Mac in Poland?

Accepted Answer

A) $1.52 
B) $2.02 
C) $3.07 
D) $4.64 
A) $1.52 
B) $2.02 
C) $3.07 
D) $4.64

Question 14

The ________ in the United States is best described as a managed float exchange rate system.

Accepted Answer

A) earliest used exchange rate system 
B) current exchange rate system 
C) exchange rate system used prior to the great depression 
D) exchange rate system set up at the end of World War II 
A) earliest used exchange rate system 
B) current exchange rate system 
C) exchange rate system used prior to the great depression 
D) exchange rate system set up at the end of World War II

Question 15

Which of the following explains why purchasing power parity does not completely explain long-run fluctuations in exchange rates?

Accepted Answer

A) Some goods and services produced in any country are not traded internationally. 
B) Consumer preferences for goods and services across countries are very similar. 
C) Most countries do not impose barriers to trade. 
D) Most countries have free markets with little,if any,government regulation. 
A) Some goods and services produced in any country are not traded internationally. 
B) Consumer preferences for goods and services across countries are very similar. 
C) Most countries do not impose barriers to trade. 
D) Most countries have free markets with little,if any,government regulation.

Question 16

Ariel is a Canadian citizen who works in Montreal,Canada and owns a winter home in Palm Beach,Florida.When Ariel spends the winters in Palm Beach,an increase in the value of the Canadian dollar relative to the U.S.dollar should

Accepted Answer

A) help Ariel as each Canadian dollar of her salary is now worth more U.S.dollars. 
B) hurt Ariel as each Canadian dollar of her salary is now worth less U.S.dollars. 
C) hurt Ariel as it is now more expensive to live in Palm Beach since the Canadian dollar appreciation. 
D) help Ariel as it is now less expensive to live in Canada since the Canadian dollar appreciation. 
A) help Ariel as each Canadian dollar of her salary is now worth more U.S.dollars. 
B) hurt Ariel as each Canadian dollar of her salary is now worth less U.S.dollars. 
C) hurt Ariel as it is now more expensive to live in Palm Beach since the Canadian dollar appreciation. 
D) help Ariel as it is now less expensive to live in Canada since the Canadian dollar appreciation.

Question 17

Under the Bretton Woods system,a fixed exchange rate supported by central banks was known as a(n)________ exchange rate.

Accepted Answer

A) par 
B) equilibrium 
C) fundamental 
D) target 
A) par 
B) equilibrium 
C) fundamental 
D) target

Question 18

Thailand's experience with pegging the baht to the dollar failed because the baht was ________ relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been ________ relative to the dollar.

Accepted Answer

A) overvalued; overvalued 
B) undervalued; overvalued 
C) undervalued; undervalued 
D) overvalued; undervalued 
A) overvalued; overvalued 
B) undervalued; overvalued 
C) undervalued; undervalued 
D) overvalued; undervalued

Question 19

Under a floating exchange rate,the exchange rate

Accepted Answer

A) will change whenever the price of gold changes. 
B) is controlled by central bank intervention. 
C) is determined by the interaction of supply of the currency and demand for the currency. 
D) is pegged against the euro. 
A) will change whenever the price of gold changes. 
B) is controlled by central bank intervention. 
C) is determined by the interaction of supply of the currency and demand for the currency. 
D) is pegged against the euro.

Question 20

Destabilizing speculation refers to

Accepted Answer

A) actions taken by the International Monetary Fund that increase lending to countries who have pegged their currencies against the dollar. 
B) actions taken by currency traders to sell a currency that is undervalued. 
C) actions taken by investors who sell a country's currency in anticipation of buying it back later at a lower price. 
D) any depreciation of a country's currency as a result of long-run adjustments to purchasing power parity. 
A) actions taken by the International Monetary Fund that increase lending to countries who have pegged their currencies against the dollar. 
B) actions taken by currency traders to sell a currency that is undervalued. 
C) actions taken by investors who sell a country's currency in anticipation of buying it back later at a lower price. 
D) any depreciation of a country's currency as a result of long-run adjustments to purchasing power parity.

Under the Bretton Woods system,central bankers could obtain foreign currency loans from the

The exchange rate system agreed to in 1944,in which the U.S.government agreed to buy or sell gold at a fixed price of $35 per ounce,is referred to as

All of the following are considered among the four most important determinants in explaining exchange rate fluctuations in the long run except

A persistent shortage of yen at a given fixed exchange rate (in dollars per yen)is evidence that the yen is versus the dollar.This shortage can be reduced or eliminated through a of the yen.

The ________ system of currency exchange was set up in 1944.

Suppose the U.S.dollar is backed by one-sixth of an ounce of gold and the British pound is backed by one-third of an ounce of gold.The exchange rate between the U.S.dollar and the British pound equals ________ per pound.

A decrease in a fixed exchange rate from $1.75 per pound to $1.60 per pound is called a(n)________ of the pound.

During the Chinese experience with pegging the yuan to the dollar,the yuan was undervalued.As a result,

Under pressure from Japan,the United States and Europe,China announced it switched from pegging the yuan against the dollar to linking the value of the yuan to a 'basket' of currencies.The result of this change was

In order to support an undervalued euro,the European Central Bank must dollars.Over time,this action will cause the rate of inflation in the EU to .

If two countries adhere to a gold standard,the exchange rate for their currencies is fixed.

A Big Mac costs $4.56 in the United States and 9.2 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,what is the dollar cost of a Big Mac in Poland?

The ________ in the United States is best described as a managed float exchange rate system.

Which of the following explains why purchasing power parity does not completely explain long-run fluctuations in exchange rates?

Ariel is a Canadian citizen who works in Montreal,Canada and owns a winter home in Palm Beach,Florida.When Ariel spends the winters in Palm Beach,an increase in the value of the Canadian dollar relative to the U.S.dollar should

Under the Bretton Woods system,a fixed exchange rate supported by central banks was known as a(n)________ exchange rate.

Thailand's experience with pegging the baht to the dollar failed because the baht was relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been relative to the dollar.

Under a floating exchange rate,the exchange rate

Destabilizing speculation refers to

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

Filters

Exam 19: The International Financial System

Under the Bretton Woods system,central bankers could obtain foreign currency loans from the

The exchange rate system agreed to in 1944,in which the U.S.government agreed to buy or sell gold at a fixed price of $35 per ounce,is referred to as

All of the following are considered among the four most important determinants in explaining exchange rate fluctuations in the long run except

A persistent shortage of yen at a given fixed exchange rate (in dollars per yen)is evidence that the yen is ________ versus the dollar.This shortage can be reduced or eliminated through a ________ of the yen.

The ________ system of currency exchange was set up in 1944.

Suppose the U.S.dollar is backed by one-sixth of an ounce of gold and the British pound is backed by one-third of an ounce of gold.The exchange rate between the U.S.dollar and the British pound equals ________ per pound.

A decrease in a fixed exchange rate from $1.75 per pound to $1.60 per pound is called a(n)________ of the pound.

During the Chinese experience with pegging the yuan to the dollar,the yuan was undervalued.As a result,

Under pressure from Japan,the United States and Europe,China announced it switched from pegging the yuan against the dollar to linking the value of the yuan to a 'basket' of currencies.The result of this change was

In order to support an undervalued euro,the European Central Bank must ________ dollars.Over time,this action will cause the rate of inflation in the EU to ________.

If two countries adhere to a gold standard,the exchange rate for their currencies is fixed.

A Big Mac costs $4.56 in the United States and 9.2 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,what is the dollar cost of a Big Mac in Poland?

The ________ in the United States is best described as a managed float exchange rate system.

Which of the following explains why purchasing power parity does not completely explain long-run fluctuations in exchange rates?

Ariel is a Canadian citizen who works in Montreal,Canada and owns a winter home in Palm Beach,Florida.When Ariel spends the winters in Palm Beach,an increase in the value of the Canadian dollar relative to the U.S.dollar should

Under the Bretton Woods system,a fixed exchange rate supported by central banks was known as a(n)________ exchange rate.

Thailand's experience with pegging the baht to the dollar failed because the baht was ________ relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been ________ relative to the dollar.

Under a floating exchange rate,the exchange rate

Destabilizing speculation refers to

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

Filters

A persistent shortage of yen at a given fixed exchange rate (in dollars per yen)is evidence that the yen is versus the dollar.This shortage can be reduced or eliminated through a of the yen.

In order to support an undervalued euro,the European Central Bank must dollars.Over time,this action will cause the rate of inflation in the EU to .

Thailand's experience with pegging the baht to the dollar failed because the baht was relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been relative to the dollar.